Manitobans should prepare for electricity rates to jump by two per cent annually for years to come after the provincial government decided to cut the fees it charges Manitoba Hydro.

The Crown utility informed the Public Utilities Board Tuesday it will update its Nov. 15 general rate application.

Manitoba Hydro is now asking for a two per cent rate increase in both 2023-24 and 2024-25. It is also asking the regulator to confirm the interim rate increase of 3.6 per cent that took effect in January 2022.

In its filing earlier this month, the utility asked for 3.5 per cent increases for the next two years.

The revised application comes after Finance Minister Cameron Friesen announced the province would retroactively reduce the water rental and debt guarantee fees it charges the Crown corporation by half.

The change is expected to save the utility about $190 million this fiscal year. The savings must be applied to Manitoba Hydro’s debt, which is about $24 billion.

Manitoba Hydro chief executive officer Jay Grewal said the request for a reduced increase in the next two years will have an impact on residential consumers.

“That’s great news when we know many customers are struggling with the cost of living,” Grewal said in a release. “It also gives Manitoba Hydro the ability to start to reduce our debt while making investments in our system so our customers get the service they demand.”

However, Hydro is now forecasting annual rate increases of two per cent for the next 19 years.

The long-term forecast considers new debt-to-capitalization ratios required under legislation that passed Nov. 3, and a rate cap which will take effect April 1, 2025.

Bill 36, which became law earlier this month, requires Manitoba Hydro to limit price hikes to the rate of inflation or five per cent, whichever is lower, while also hitting debt-reduction targets in 2035 and 2040.

In its earlier application, the utility forecast increases to the annual consumer price index to be at two per cent, and noted it would not be able to meet debt reduction targets while capping rate increases.

However, with changes to water rental and debt guarantee fees, Hydro is now expected to save an estimated $4 billion in accumulated debt over the next 20 years.

Grewal said predictable rate increases will allow Manitoba Hydro to re-invest in infrastructure, including replacing poles and retrofitting generating stations.

“We’ll also be in a better position to meet the needs of our province in the future as we see increased electrification, resulting in the need for new generation and transmission, coupled with improvements to our distribution system and technology enhancements, all with the goal of serving our customers better.”

On Tuesday, Friesen said the province is focused on stabilizing the utility and protecting the “low rate advantage” in Manitoba.

“Things just got a lot easier for both Hydro and ratepayers of Hydro,” Friesen said.

Manitoba New Democratic Party Leader Wab Kinew said the provincial government can do better than two per cent rate increases, and reiterated his party’s commitment to a rate freeze.

However, he declined to offer specifics until the provincial election, scheduled for Oct. 3, 2023.

“The bottom line here is the PCs are raising Hydro rates again,” Kinew said.

Residential customers with electric heat will pay $4 a month more as of September 2023; and another $4 as of April 2024.

Customers without electric heat will pay $2 per month more under the same schedule.

The Public Utilities Board will hold a pre-hearing conference for the application next week.